We’ve all been taught that having a million dollars is the benchmark of success. That is why banks and other institutions almost always force us to save.
Though there is a big decrease in people saving, there’s still the belief that a million dollars will be everyone’s “saving grace.”
According to USA Today, a person can actually become a millionaire by retirement just through savings. For example, if you started saving when you were 20 years old with around 13.35% of a $2,288 monthly median, you’d be able to get there. However, this is still not an easy feat even if you’re located in one of the cheapest state in the U.S.
If you’re going to do it, you will basically come down to a $22 in spending cash. See the computation below:
If that 20-year-old paid the median rent in one of the 10 cheapest U.S. cities, their monthly housing cost would be $632. Add on around $300 monthly in federal taxes, an average student loan payment of $242, a low-cost grocery bill of $206, average Internet and utility bills of $364, and average commuting costs of $216 — and they’d be spending $1,960 monthly just for necessities.
If we reserved $305 for savings, it would leave our 20-year-old with just $22 in spending cash. And that doesn’t include a cellphone, clothing, or entertainment expenses.
It’s possible to spend less — perhaps by living with parents, having a roommate, or opting for income-contingent student loans. The 20-year-old’s salary will also increase, and saving $305 per month will become much easier as they get older.
Still, these numbers show that when you earn the median income for your age group, you have to start saving young and live frugally if you want to become a millionaire. You can definitely do it — but you must spend and save very carefully.
Though there’s a slim chance you can be as strict as the $22 spending cash example, the millionaire retirement goal will still have a lot of restrictions.
Depending on where you live, you still have a time limit on the longevity of that million dollars. Yes, even if it has earned interest in the bank. In some cases, the million dollars could last about 17 years of average U.S. expenditures. This is for general, basic needs. This doesn’t cover you going to the Bahamas to enjoy the waves and the breeze of retirement.
So, if million dollars shouldn’t be the “goal for retirement,” what is?
According to author and entrepreneur Robert Kiyosaki, million dollar retirement mindset will no longer give you the luxuries of your dream.
You can try living as frugal as $22 spending cash per month, but this is not realistic. This is not living at all.
You need to be able to balance the emergency funds you have every month, savings as well as your investments. There are new ways to earn money and you need to start there.
By creating assets, you are expanding your portfolio and paving your way not only from clearing your debt, but also in building your empire.
So, whether your end goal is for retirement at 40 or it is for investing in more assets, you have to know how to balance your monthly salary.
The other thing to remember is to be diligent when it comes to your financial statement. Financial statements are not only available to businesses, but to individuals as well.
You need to audit your spending, your debt and your available cash to know where you’re at. By doing so, you have a clear picture of where you want to be and how far you need to go.
Be transparent with your finances and track your spending.
Saving is not the only way to be a millionaire. You have to start building your financial planning today.